Namaste, Sat Sri Akaal, and Salaam. 🫡

Today we’re diving into -
- Quick-commerce giants’ platform fee profits,
- Indian regulators’ switchback on AI regulations,
- and Tata Consumer’s hunt for deals.

Our read time today is 3 minutes and 37 seconds - faster than thele waale bhaiyas started bumping avocado toast. 🙈

Let's dive in. 👇

Market Vibe Check

Zepto starts playing with platform fees to hop on the Swiggy/Zomato-inspired profit push. 💸

TLDR -
- Zepto is following Swiggy/Zomato’s footsteps and slapping on a 2 INR fee per order.
- No one really minds paying 1-2 INR extra, and that small amount times their millions of orders per year means crores in the bank.
- There are also no extra costs to earning this income, which is exactly what turned Zomato profitable.

Scale is a crazy thing - and our beloved last-mile convenience startups are finally unlocking their power.

A few Swiggy users noticed last year that their order totals were coming to decimal numbers, while their cards were getting charged with whole number amounts.

Basically, if your order came to a total of 198.3 INR (or something like that), you’d actually be charged 200Rs. This obviously seems very insignificant, because no one notices an extra 1-2 INR getting deducted.

But when you slap this extra charge on Swiggy’s 100s of millions of orders per year, you have a PROFIT MACHINE.

Some back of the envelope maths - Swiggy clocks almost 2 million orders per day. Multiply that by an average extra charge of 2Rs, and then by 365 - now you suddenly have a revenue stream that does close to $20 million USD in profit per year!

This exact ‘business’ is what turned Zomato profitable - a 3 INR delivery fee across every single order, regardless of size. For every 1Rs they hike the platform fee by, they increase their annual run-rate by around 25-30Cr depending on order volumes.

Zepto is also hopping on this with a 2-5 INR fee per user, per order - and with their current 300-400k daily volume, they’ll add a extra 30 Crores to their bottom line.

And remember - there are no “costs” to earning this - so it’s literally a 99% margin business.

Insane stuff. 🤯

Indian regulators reverse their staunch anti-AI stance. 🤔

TLDR -
- Indian regulators were nudging ‘significant’ AI companies to government-review their models before launch.
- Founders didn’t like the idea of adding unnecessarily bureaucratic angles to an otherwise fast-paced industry, and they also don’t want to share all their proprietary tech - so they started complaining (with good reason).
- It looks like the government will be going back on their statement and not policing AI as hard as they said they would.

Last week, Indian AI regulators brought out the laathi-danda on AI startups, asking them to share their model’s workings and training data with the government before launching.

For obvious reasons, this attracted a decent amount of hate - with folks like A16Z’s Martin Casado calling it a “travesty” of a move.

Although this advisory to share all info with regulators was not legally binding, ministers did say it signaled the ‘future of AI regulation’ in India - which is odd, because just a year ago, regulators said that they’d be giving AI companies free reign to do what they wanted.

Dealing with such volatile and unpredictable government bodies is difficult, because in a sensitive industry like AI, we need decisive and strong regulation to succeed.

Without it, we end up getting longer dev timelines, higher costs, slower launches, internationally competitive disadvantages - which just hurts everyone in the business.

Tata Consumer CEO gets a “blank check” to go after companies. 💰

TLDR -
- Tata’s freshly-merged Consumer arm makes $1.7bn a year and wants to go HAM on acquisitions.
- Their CEO was handed a blank sheet of paper to think of potential targets.
- They’ve got $300mn in dry powder to spend, and will do so very quickly :)

Early last year, Tata decided to pool in all their FMCG resources and bundle the good stuff up into one company to create Tata Consumer.

TC did $1.7bn in revenue last year and was in the headlines briefly when they tried to acquire Haldirams, but got scared away by the $10 billion price tag.

TC is back in the news - but this time, they’re keeping an eye out for any FMCG brand alive. Their CEO literally said that he was given “a blank sheet of paper” to brainstorm acquisition targets this year.

They’re in a desperate attempt to diversify AWAY from their dominant beverages business and enter other global consumer markets - and are hunting for somewhere to plow their $300mn of dry powder.

Tata ideally would love a business that they can plug both internationally and in India - especially something like coffee/tea, which works brilliantly abroad, and is quickly catching on as India’s middle class premiumizes.

One place they’re definitely not entering is the fizzy drinks/potato chips market, because it’s just too easy to become collateral damage while giants like Coca Cola, Pepsi, and FritoLay are fighting.

FMCG is great, because once you tick a few necessary boxes - distribution, relationships, product, branding - there is virtually no universe in which your product ‘flops.’

Amazing momentum. 🚀

In other news… ☕

Microsoft hires Google DeepMind’s founder Musti Suleyman to run their consumer-facing AI unit (FT)

Nvidia says that ‘AI as we see in the movies’ is possible within 5 years (TC)

Borse Dubai gets ready to unwind a $1.6 billion stake in Nasdaq (BBG)

Saudi Arabia plans a $40bn push into AI (NYT)

Hertz fires their CEO over a $250mn EV disaster (CNN)

And that’s the tea the chai for today.

Thanks for reading, and we hope you enjoyed it.

Lots of ❤️,

Team CC